To save on both water heating and water, install a low-flow showerhead in your bathroom(s). Easily installed with a wrench or pliers, a low-flow showerhead can cut water use as much as 50 percent and still feel great.
Also attach low-flow aerators to kitchen and bathroom faucets. For a family of four, this can save up to 8,500 gallons of water a year. Aerators allow the faucet to flow stronger while actually using much less water.
Avoid running water continuously while doing dishes, washing up, brushing teeth or shaving. Try filling up the sink and using a stopper instead.
Wrap the hot water pipes coming out of your water heater with insulation. Wrap those pipes nearest the heater first for greatest savings.
Set the thermostat to 120°F or less for normal use, and lower the setting whenever you will be away from home for extended periods. For every 10° you set back your water heater temperature, you cut energy use 3 to 5 percent. (Note: Some dishwashers may require a higher minimum temperature setting. Check your owner's manual.)
Most newer water heaters are well-insulated. However, if the side of your water heater feels warm near the top, you can cut heat loss by installing a water heater insulation blanket. (First, check your owner's manual to make sure that this step won't void the manufacturer's warranty. If the warranty period has expired, this is not a problem.) Make sure to use the appropriate type blanket for your water heater, whether it's electric, gas or oil. Follow the manufacturer's installation instructions carefully.