Adding insulation to the water heater is a given for any household. There is a wide range of water heater blankets available, and they’re quite easy to install. Electric water heaters are straightforward to install (typically you do not insulate the top of the unit). Gas water heaters can be problematic, to be sure you do not block the free flow of air to the burner and the ready flow of exhaust fumes. Anything gas-powered MUST be done by a contractor. Why? Because a timer might turn the unit on and the flame misfunction! Bad news bears!
The illustration suggests a thermostat outside the house to adjust the temperature lower in the summer, and a little higher in the winter. Or, you can install a mechanical timer to turn the unit off at night or low-use hours.