You can save water-heating costs (about 15% for an average home’s energy bill) by reducing the amount you use, its temperature, and heat loss from pipes and tanks. Try some of the following, and you’ll save water, energy and money.

Insulating you water heater
Every tank-based water heater should have an add-on insulating blanket. Inexpensive and easy to install, these vinyl-covered blankets reduce heat loss from the outer walls of the tank. Because the heater turns on less often, you save money year in and year out—and you extend the life of your water heater.

Choose the right water temperature
If your water heater is set above 120°F, you could probably reduce the temperature with no ill effect. There’s bound to be some heat lost in the pipes, but 120°F is hot enough to produce hot showers and wash clothes. Higher temperatures can dramatically increase heat loss from your water heater and make the appliance work harder, shortening its life.
Use the shower temperature as a guide. If you’re adding a lot of cold water to your shower, the water heater is probably set too high. Turn the temperature control unit on the water heater down past the midpoint, and check the shower temperature for a day or so. Turn the temperature up each day until the water heater is supplying enough hot water for showers on a busy morning.
If your dishwasher has no internal water heater, you may need a higher temperature. Diapers in your washing machine also require a higher temperature to kill bacteria.

Insulating hot-water pipes
Pipe insulation isn’t intended to keep standing water in pipes hot. Rather, it reduces heat loss as the water flows through. Insulation can make a tremendous difference in the water temperature at the taps. And that in turn lets you turn down your water heater, saving both energy, and wear and tear on the heater.
Insulate the first ten feet of pipe leaving the heater. In long hot-water runs (for instance, from a basement water heater to an upstairs bathroom), add pipe insulation to your hot-water pipes wherever they’re accessible. It can only help.
The easiest pipe insulation to install is made of long foam tubes that are slit to allow you to slip them over your pipes. They’re rigid enough to let you push them up into wall cavities you can’t reach directly. Aluminized pipe-wraps work well at joints and complicated connections, but require full access to the pipe in order to apply them.

Water-saving fixtures
Toilets: While your old toilet may use up to eight gallons per flush, low-flush models (which are increasingly mandated by state and local codes) use only 1.6 or 3.5 gallons per flush. Some of these miserly models have a pressurized tank that produces a rinsing force equivalent to 70 gallons per minute.
To reduce water consumption in a conventional toilet, bend down the float arm or lower the float cupto reduce the water level in the tank. You can also place a jug of water in the tank or install a water-dam kit. Both of these methods require experimentation to find the lowest water level that still produces an adequate flush.
Taps: Add a flow-reducing aerator to the faucet end. It lowers your water use and reduces splashing in the basin.
Shower Heads: Old shower heads use as much as eight gallons per minute. Newer ones deliver the same pressure at half the flow.

Money-saving Tips
When you save hot water, you get a double payback. Not only do you cut your water bill, you also reduce your gas or electric bill.

Rule of Thumb
Lowering water temperature from 140°F to 120°F can save 18 percent of the energy for the higher setting.

Safety
Bath water above 110°F can scald small children. If you’re buying new faucets or shower valves, be sure to get one with antiscald protection.