I do use watercolor pencils a great deal. I seldom color the entire image though, but rather blend a little color here and there to give the idea. Lots of folks are equally good at doing their scroll saw projects, and something as simple as a little color can set you apart from the rest.
There are many videos on U-Tube which show blending techniques and so on, but I basically played around on a few small items to come up with what worked for me.I start out really lightly and then add more over top if I want it darker. I use a soft artists brush with a slight amount of water to blend the colors, and also bought extra white pencils to use as a blending tool as well. You can always sand it off it you don't like the results. The pencils can be used on wet or dry materials, though I prefer starting on a dry surface with light pencil marks and blending it in toward the center. You can blend 2 or more colors and if you remember "where the shadows are and work dark to light, you can further enhance your projects.
Once completed, I do seal the entire project to set the colors, with any clear matt finish spray or water-based matt or satin varnish. I have had folks tell me that over many years, the colors have not faded, so I must be doing something right.
Here are a few examples of what I do. I am sure with a little practice you can do as well but probably better, Good luck and enjoy.