Although it may be hard to believe, in the average household the second most costly output is in heating the water. Even more so than your central heating or food costs, ensuring that your home has hot water is often an expensive requirement. However, a lot of this cost can be overcome, or certainly reduced, by simply ensuring you have the most cost-efficient water heater installed in your home. By combining the right water heater with more energy efficient devices, you should soon see the costs of your bills plummet.

One of the most common types of water heater, and one that is found in a lot of homes, is a storage tank. The beauty of these appliances is that they can run on either gas, electric or even oil heating sources, so can be used in pretty much any home. By storing heated water in the tank, this method ensures that hot water is available at all times. The only main drawback to this is that as the tank empties of hot water, cold water refills it, and it can take a while to warm up to full heat. And with an energy-efficient model, the savings in overall performance can be as much as 40%.

Another excellent type of water heater is a heat pump water heater. This is extremely efficient when used, as it works by using your electricity to transfer heat from the actual surrounding air to the tank itself. Since you are not using any power to actually generate heat, the savings are immediate. If you can imagine how your standard refrigerator in your kitchen works, it traps cold air and keeps it in, hence keeping the contents cold. A heat pump water heater works in reverse, and traps the heat instead. Another benefit is that you can even save on air-conditioning expenses too, by utilizing the cool air being transferred to the tank when not used.

Possibly one of the more cost-effective water heaters is the newer 'tankless' water heater. Since they only heat water as and when it's required, there's no need for a tank, and as such no extra costs in keeping a tank full of water warm until you need to use it. One of the drawbacks of this system is that because there is no tank in use, the amount of hot water can be limited, and you may find that there isn't enough generated if you have a larger house, In this case, you may wish to use it as a back-up to a larger system.

A slight extension to the idea if a tankless water heater is the low mass water heater. This is the latest in tankless technology, and can negate the loss of storage that a standard tankless heater may suffer from. Since they combine gas, electronic and power ignitions, they can be attached to an external tank, and as such give you the best of both a traditional water heater and the convenience of a tankless unit.