Heating water can account for up to 25% of your household energy costs, but there are some inexpensive things you can do to help increase efficiency and your bills.  Wrap your heater in a blanket Your water heater needs help to stay warm, especially if it's in an unheated space. A fiberglass insulating blanket can cut heat loss by 25% to 40% and save 4% to 9% on an average water-heating bill.  Insulating blankets are cheap, usually less than $30 at the home center, and it's easy to install one yourself. Follow the included directions, and take care not to block the thermostat on an electric water heater or the air inlet, exhaust, or top of the tank on a gas unit. Note:  If your water heater is fairly new, check the manufacturer's recommendations first. Many newer units already have insulating foam built in; on these models, an after-market jacket could block a critical component. Install low-flow fixtures One of the surest ways to cut hot water costs is to use less of it.  By installing low-flow showerheads and faucet aerators, which cost as little as $10 to $20 each, you can cut hot water consumption by 25% to 60%. Turn down the temperature Many water heaters come from the factory with the temperature set needlessly high. For every 10 degrees you turn it down, you'll save another 3% to 5% on your bill. If the thermostat on your water heater doesn't have a numbered gauge, put it midway between the "low" and "medium" marks. Wait a day, then measure the temperature at the tap with a standard cooking thermometer. Keep adjusting this way until you hit your target temperature. Drain the sediment Tanks naturally build up sediment, which reduces the unit's efficiency and makes it more expensive to operate  Draining the tank is relatively easy. Turn off the water and power to the unit (set the burner on a gas unit to "pilot"). Then connect a garden hose to the spigot at the base of the tank. With the other end of the hose at a lower spot outside the house where discharging hot water poses no danger, carefully lift the pressure-relief valve at the top of the tank and turn on the spigot; water should begin to flow. While most manufacturers recommend draining the tank once or twice a year, you don't have to drain it completely; in fact, the Department of Energy (http://www.energy.gov) recommends draining less water more often-just a quart every three months. Insulate exposed hot-water pipes Wrapping hot-water pipes with insulation reduces standby losses. Water arrives at the tap 2 to 4 degrees warmer, which means you won't have to stand around as long waiting for it to heat up, thus saving water, energy, and money. While this isn't an expensive job to do yourself-six-foot-long, self-sealing sleeves easily slip over pipes and cost about $2.50 each-it could take some effort, depending on where your hot water pipes are. Exposed pipes in the basement are an easy target, but if pipes are in a hard-to-reach crawl space or inside walls, it might not be worth the trouble. Based on an article by Joe Bousquin, from HouseLogic.com originally published: August 28, 2009.  Visit HouseLogic.com for many more helpful articles.