Windows are a source of tremendous energy waste. The problem is that the one or two panes of glass found in most windows are just very poor insulators. To make matters worse, because many windows open, they let air leak around their edges even when closed. The window frame is another problem. Metal frames transfer the heat or cold from the outside into your home and gaps between the window frame and the wall also leak air.
Caulking around a window, inside and out and installing proper weatherstripping can dramatically improve a window's efficiency. If you can remove the interior trim around the window, you may be able to add insulation to make even further improvements.
The exterior trim around a window can allow drafts, and even worse - water, to enter your home. Proper caulking of the trim will reduce or eliminate the problem. The trim is made up of four pieces in most cases. Each piece should have exterior grade, flexible caulk applied to the seam between the trim and the siding. The edges that face into the window should all be caulked. The outer edges of the trim should also be caulked, with the exception of the bottom edge. Any water or condensation that manages to make its way into the wall needs a a way to drain out. Leaving the bottom edge uncaulked is important for drainage.
The interior trim can also be caulked in the same way except you can also caulk the bottom edge. Use an interior grade, flexible and paintable caulk for the indoor trim.
However, before you apply the interior caulk, if you want to go the extra mile, insulate behind the trim. To do this, remove the moulding trim to expose the window frame. There is often a gap between the frame and the wall stud. This cavity allows drafts to occur and so it should be loosely filled with insulation. You can use spray expanding foam instead. If you use expanding foam, use care as it can expand so much that it racks or warps the frame. Use low expansion foam and work slowly to give the foam a chance to expand as you spray it.
Finally, weatherstrip the opening edges of your window. If the window already has weatherstripping, inspect it for damage and that it is still flexible and pliant. If it has cracks or is stiff, it should be replaced. Take a piece of the weatherstripping with you to the store to make sure you select the right style and size.
If the window doesn't have any weatherstripping