A system and method for pre-heating water prior to entering a hot water heater is disclosed. The system includes: a cold water supply line; an ambient air heat exchange device positioned within an insulated area of a building wherein the ambient air heat exchange device is connected to the cold water supply line; and a fluid connected for interconnecting the ambient air heat exchanged device to the hot water heater, the ambient air heat exchange device being operable to: allow incoming cold water to enter the ambient air heat exchange device as required; permit the transfer of heat from ambient air within the insulated area to the cold water within the ambient air heat exchange device to effect pre-heating thereof; and pass water, as thus preheated, from the ambient air heat exchange device to the hot water heater as required. The ambient air heat exchange device may comprise a reservoir or a heat exchanger having at least one pipe. By utilizing energy stored within an insulated area to pre-heat incoming cold water, a reduction in hot water heating costs can be realized. Also disclosed is a method for pre-heating water in an insulated building prior to entering a hot water heater. Also disclosed is a pre-heater for pre-heating water prior to entering a hot water heater.