Australia is currently facing a serious water crisis. Saving water is not the government's solo effort, it also requires support from individual households. The use of rainwater tanks for rainwater storage has been highly recommended for both outdoor and indoor uses. This paper investigates cost effectiveness on the use of rainwater tanks for Australian residential environment. Seven cities are examined in this paper, including Gold Coast, Brisbane, Melbourne, Sydney, Adelaide, Perth and Canberra. Cost for installing and operating rainwater tanks and cost from alternative water sources including building additional dams and desalination plants are compared. It is found that using rainwater is an economical option for households in Gold Coast, Brisbane, and Sydney. Recommendations of suitable tank sizes for different household environments are also proposed.