Colour-coded notes photograph well. That is part of the problem, because the systems that look best are usually the ones that collapse first.
The underlying question splits in two, and they have different answers. Does colour help memory? Modestly, yes. Does colour-coding help your notes? Only if the system is small enough to survive contact with an actual lecture.
What the research supports
Dzulkifli and Mustafar's review of colour and memory concludes that colour can improve attention and recognition performance, mainly by increasing arousal and by making material more distinctive. Their own experimental work found that coloured backgrounds improved recognition of shapes relative to monochrome, with warm colours outperforming cool ones.
That is a real effect, and it is worth knowing what kind of effect it is.
It is mostly distinctiveness, the same mechanism as the von Restorff effect. One item in red among twenty in black is remembered better. Twenty items in red among twenty in black is just two colours of noise. The benefit is a function of contrast, and contrast is a scarce resource that you spend by using it.
It is also attentional, not magical. Colour makes you look at the thing. If you look at the thing and then do nothing with it, you have engineered a moment of interest and no memory.
The important negative result is adjacent. Dunlosky's 2013 review rated highlighting as a low-utility technique, one of the weakest of the ten studied. That should temper any enthusiasm here, because highlighting is exactly colour-coding in its most common form. Marking text does not encode it. See how to highlight effectively.
Why colour systems fail
Almost always the same way.
Too many categories. Six colours means six decisions per page. Deciding is not free, it is cognitive load spent on classification while the lecturer keeps going. Two weeks in, everything is blue.
Categories that overlap. Green for "important", yellow for "exam-relevant", orange for "review later". These are the same category wearing hats. If you have to think about which one applies, the scheme is broken.
Decoration mistaken for encoding. The pastel spread on social media is an artefact of rewriting notes at home with time and good pens. That rewrite is genuinely useful, and it is useful because it is a rewrite, not because it is coloured. See the illusion of competence.
Colour as the only carrier. If the meaning lives purely in the colour, the notes are unusable when printed in mono, viewed by anyone colour-blind, or read on a phone at night. Roughly one in twelve men has some form of colour vision deficiency. Colour should be a second channel, not the only one.
The three-colour rule
The version that survives an actual term.
Black or blue for everything. The default. No decision required, which is the point.
One colour for what you did not understand. Red is conventional. This is the single highest-value mark you can make, because it is the only information you cannot reconstruct later. An hour after the lecture, the confusion is gone but the gap remains.
One colour for what is yours. Your own questions, objections, connections, the sentence you thought of that the speaker did not say. Keeping your thinking visually separate from the source is the most useful distinction in a page of notes, and it is what makes literature notes turn into something later.
Three colours, one decision, no classification scheme to remember. If you want a fourth for definitions, fine. Stop there.
Where colour genuinely earns its place
Some jobs it does better than anything else.
Structural signalling. One colour for headings, one for body. Not a code, just a hierarchy your eye can follow while skimming. This is what makes the outline method readable at speed.
Diagram lines. In concept mapping and mind maps, colour separating branches is doing real work, because the alternative is a tangle of identical lines. Here colour is carrying topology, which text cannot.
Marking a single thing on a page. The best use of colour is the rarest one. One item, ringed, on an otherwise plain page. Maximum contrast, maximum distinctiveness, zero system to maintain.
Digital tags where colour is the label. In an app, colours attached to tags or notebooks are effectively free, applied after the fact rather than during capture, and reversible. The failure mode there is different: too many tags, not too many colours. See tags vs folders.
Digital versus paper
On paper, colour costs a pen change, which is why paper systems collapse to whatever pen is in your hand.
Digitally the cost is near zero, which sounds better and is not. Free colour produces sprawl, thirty tags in five hues, a legend nobody can recite. The discipline has to be imposed rather than enforced by friction. See digital vs paper notes.
One durable advantage of digital: colour can be added during review rather than during capture. That is the correct time for it. You know what mattered afterwards, and applying it afterwards means a second pass over the material, which is the thing actually helping.
The short version
Colour helps by making one thing stand out from everything else. Every additional colour spends that budget.
Use three. Reserve one for confusion and one for your own thinking. Add colour when reviewing, not when capturing. If your notes look beautiful and you cannot say what any colour means, the system is decoration.
More in how to take better notes, the Cornell method, and how to review your notes.