Abstract
Short‐term memory, phonological processing and reading are associated abilities, but the causal relationships between them are yet to be determined. A longitudinal study of 40 children as they develop from 5 to 7 years old is analysed to investigate the interactive development of these skills. In children who have not yet begun to read it appears that phonological skills promote the acquisition of letter knowledge and that these two abilities, together with visual STM, lead the development of reading. The pattern changes once reading acquisition begins. LISREL analyses demonstrate that reading now promotes further growth of phonological skills and auditory STM, and these phonological skills in turn lead to the development of visual STM. The acquisition of reading makes relevant active phonological processing in short‐term memory and thus stimulates the development of these skills.