Thank you for the clarification of channels, I understand it a lot more now! 
And I’ve just done this with a single texture for now just to test whether it works or not and I got it working but when I try to change the pants color, it can’t change to other colors apart from red, moving the color picker around just changes the saturation of the red.
As you can see, I set the color to blue and green and the pants color doesn’t match.
Here is my material so far, I’ve set the blend mode to translucent since when I set it to masked, the sprite shows up extremely pixelated and I’ve set the shading model to unlit.
Again thank you so much for your help.