If you think you need a bigger water heater because the last person in the shower gets left in the cold, you may just need a new showerhead. Low-flow showerheads can cut hot water use for showering by 75%, so everyone can have a hot shower. Here are some other easy things you can do to cut water use and energy bills.
Install faucet aerators at kitchen and bathroom sinks. These devices reduce the flow from taps without reducing the force of the water. They usually cost under $3 and take just minutes to install.
If you have a dishwasher, do full loads of dishes. If you are washing dishes by hand, wash and rinse in a pan, not under running water.
Wash clothes in cold water whenever possible, and do full loads of laundry. Also consider buying a tumble action (also called horizontal-axis) clothes washer. They cost more, but use only two-thirds as much water as conventional washers. The new machines also get clothes cleaner, reduce drying time, and are gentler on delicate clothes. If you use an electric water heater and an electric dryer, a tumble action washer can pay for itself in a few years.
Turn down the water heater thermostat. Most water heaters are shipped with the thermostat set to about 140°F, so the water is hot enough to scald. Sometimes installers will turn up the thermostat even further. If you turn it down to about 120°F, energy savings can be significant. Water heater thermostats are notoriously inaccurate, so just turn yours down little by little, each time giving the tank a few days to adjust, until the water is just hot enough for your needs. (If you use a dishwasher without a booster heater, you may not want to turn down the temperature; most dishwasher manuals recommend that water be 140° at the tap. This recommendation is controversial, with some experts maintaining that such high heat is unnecessary.)
Turn the water heater off or down to its lowest setting if the house will be empty a day or more. Gas units often have a setting called "pilot" or even "vacation," which keeps the pilot light on but turns the thermostat off. Older gas water heaters lose half their heat through the walls of the tank and up the flue under normal conditions. These standby losses continue even when nobody is around to use hot water.
Wrap the tank with a fiberglass water heater blanket and wrap hot water pipes with foam sheaths to reduce standby losses. The cold water inlet pipe to the tank should be wrapped for about five feet as well.
Excerpted from No-Regrets Remodeling by Home Energy (1997)