Should You Upgrade to a Smart Home?

ByNathan Paulus
Edited byLukas Velunta

Updated: March 15, 2024

ByNathan Paulus
Edited byLukas Velunta

Updated: March 15, 2024

Advertising & Editorial Disclosure

Smart home technology is gaining popularity for its convenience, improved energy efficiency and ability to increase home value. If you can shoulder the upfront costs, making these upgrades can also benefit your finances in the long term. Understanding the pros, cons and costs of smart home technology can help you make informed decisions tailored to your financial situation.

Smart Homes: An Overview

A smart home, also known as a connected or automated home, employs advanced technology to enhance and simplify daily household tasks. It offers the convenience of managing your home remotely through a smartphone or tablet or via automated schedules.

Smart home devices are interconnected and accessible through a central point such as a smartphone, tablet, laptop or game console. These appliances have self-learning capabilities to adapt to the homeowner's schedule and preferences. Integrated services like smart doorbells, security systems and appliances are part of the Internet of Things (IoT), which enables physical objects to collect and share data.

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When setting up a smart home, you can use two types of wiring systems: wireless and hardwired systems.

  • Wireless systems are ideal for smaller homes or rentals and offer flexibility with costs starting in the hundreds. However, they may require additional investment in Wi-Fi boosters or access points for reliable connectivity.

  • Hardwired systems are more suitable for new constructions or major renovations and provide increased reliability and security. But they come with higher upfront costs than wireless systems and require additional space for network hardware.

Consult an installer to match your financial and technical needs to the ideal smart home system.

Pros and Cons of Upgrading to a Smart Home

Smart home modifications automate tasks and manage resources efficiently, reducing energy usage and potentially increasing the home's value. However, the benefits aren't always immediate and come with initial and ongoing costs, as well as privacy concerns due to data collection. Understand these advantages and drawbacks to budget smart.

Pros of Smart Home Modifications


Cons of Smart Home Modifications


Smart Home Upgrade and Maintenance Costs

Smart home upgrades come with costs varying significantly, from minor improvements to extensive modifications, including initial upfront and ongoing costs. On average, according to HomeAdvisor, setting up a smart home costs about $927. Most homeowners spend between $182 and $1,677, though some setups can cost as much as $3,000.

For comprehensive automation of an average-sized four-bedroom, three-bathroom home, expenses can reach up to $15,000. For luxury, fully-integrated homes, costs range from $10,000 to $150,000. A clear understanding of these costs helps you make informed home improvement decisions and optimize your budget.

Upfront Costs

Upfront costs are the initial expenses incurred for smart home modifications. These primarily include the purchase of smart devices and their installation fees. Note that installation costs are separate from the purchase price of the devices.

Cost of Smart Home Devices: $800–2,500

Smart home device costs vary greatly depending on the system's complexity, specific requirements and brand. Different brands often provide a range of packages and subscription models, significantly affecting the overall cost. Cost is also affected by the size of your home. Basic smart home features, like a smart thermostat, can start at around $800. By contrast, a comprehensive whole-house security system may cost over $2,500.


Heating and Cooling Systems

Smart heating and cooling systems, like programmable thermostats, offer precise temperature control and improved energy efficiency. They allow for remote adjustments and can adapt to your schedule. Smart thermostats range from $70 to $280, while complete automated systems can cost between $800 and $2,000, including smart fans and air conditioning. A smart thermostat can significantly reduce energy use, potentially saving 15 to 20% on heating and cooling bills by adjusting settings while you're asleep or away.


Lighting Systems

A fully automated whole-home lighting system ranges from $1,000 to $3,000, including installation. Prices start at around $35 for smart lamps, $15 to $150 for smart light switches and $10 to $20 for individual bulbs. Once installed, you can control these systems with a smartphone app and set schedules for light operation, enhancing energy efficiency and home security.


Home Entertainment

The cost of automating home entertainment systems varies, starting at about $30 for basic TV or audio connections. More sophisticated setups can reach up to $2,000. This automation lets you control all devices from a central hub, typically via your smartphone or a single remote. Many systems offer programmable functions, shortcuts and macros to quickly access favorite streaming services, devices or video games.


Security Systems

Home security automation is a significant part of many homeowners' budgets, and prices vary widely. The average cost for automated home security systems is between $700 and $5,000. These systems can range from basic setups with an intruder alarm and a doorbell camera to comprehensive whole-home security solutions. These advanced systems may include smoke, fire, and water sensors; cameras; smart door locks; and motion and door sensors.


Other Smart Home Features

Various devices can be integrated into your home automation setup for a personalized experience. These additions cater to different aspects of home life and vary in cost:

  • Smart garage door opener: Ranging from $30 to $100, these allow for remote control and monitoring of your garage door.
  • Smart windows: Costing between $85 and $130 per square foot, smart windows offer climate control and privacy settings.
  • Smart doorbell: Priced from $60 to $200, smart doorbells enhance security with features like video surveillance and remote access.
  • Smart blinds: Available for $100 to $250, these provide automated light and privacy control.

Installation Costs: $80–500

Installation costs vary depending on the need for professional services, the installation's complexity and the modifications' scope. Basic, plug-and-play smart home upgrades can be installed within a few hours. However, more complex installations may require hiring an electrician, technician or a specialized professional.

Professional installation costs about $80 to $100 per hour. While most homeowners can handle plug-in systems, hardwired systems are best installed by professionals. Wireless installations might take only a few hours, costing around $150 to $200. By contrast, wired installations could take a day or more, potentially adding $500 or more to the overall cost. Some manufacturers may offer installation services as an add-on or included in the purchase price.

Ongoing Costs

When investing in smart home modifications, consider the initial purchase and installation costs and the ongoing expenses. These costs typically include maintenance such as repairs or software updates, potential energy usage and internet connection increases and possibly higher insurance premiums.

Maintenance expenses can be one-time, recurring or unexpected and vary by device. The cost of maintaining these enhancements is influenced by several factors, including the device's complexity, the quality of components and manufacturer support. Another consideration is the cost of internet connectivity. Larger smart home projects might necessitate rewiring or upgrading your internet connection.

How to Save on Smart Home Upgrades

You can upgrade your smart home without breaking the bank by planning ahead. Start by focusing on affordable technologies and adjustments that easily integrate into your daily life, considering their long-term impact on your budget. Some energy-saving devices may even qualify for financial incentives from the government.

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The U.S. Internal Revenue Service (IRS) oversees these tax credits, which can be claimed on your federal income taxes for the year the smart home upgrades are made. To claim the credits, use IRS Form 5695. This form is specifically designed for residential energy credits. Follow the provided instructions carefully to ensure you correctly file for these credits. By accurately completing Form 5695, you can take full advantage of the available tax benefits for your energy-efficient home improvements.

How Smart Home Upgrades Impact Insurance Costs

Integrating smart technology into your home can often lead to lower homeowners insurance premiums, because these technologies decrease the likelihood of costly claims. However, these upgrades can also enhance your home's value, potentially requiring broader coverage and increasing premiums.

The impact of these changes varies depending on your insurance provider and the specific upgrades made. Always consult your insurer before purchasing smart home modifications to help you understand their potential impact on your coverage.

How to Optimize Upgrades for Insurance Savings

Insurers often recognize the preventive advantages of smart technologies, like improved safety and security, and may offer discounted premiums for such upgrades. Here are tips for optimizing your policy:


Additional Resources

We've compiled a list of resources to help you navigate smart home modification projects.

  • AARP: Focused on empowering aging individuals, AARP provides advice on smart home modifications for comfort and accessibility.
  • Consumer Reports: Consumer Reports offers comprehensive reviews and comparisons of consumer products, including smart home technologies.
  • Department of Housing and Urban Development (HUD): HUD offers various programs and grants that can assist in financing smart home modifications, especially for low-income households or those needing accessibility improvements.
  • Energy Star: Energy Star, run by the Environmental Protection Agency and the Department of Energy, provides information on energy-efficient smart home products. This could be particularly useful for readers interested in reducing their energy bills and carbon footprint.
  • National Association of Realtors (NAR): NAR often publishes studies and reports on how smart home features can impact home values, which would be valuable for homeowners considering resale value.

About Nathan Paulus

Nathan Paulus headshot

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.