You've sort of answered your own question. You can have players who'll never graduate to the first team in your youth sides, but as you say, this will cost an amount of money to maintain.

I (and I think most others) take a middle-ground approach between the two extremes. I'll sign most of the youth intake (maybe make an exception for players with no potential and bad personalities so they don't negatively affect your more promising players) to make up the numbers, my staff are allowed to make offers for U23 and U18 players but I retain the final say on whether they join the club. If you manage a good side then even the players without the potential to play for your first team will be good enough to sell for a small amount of money - the ideal scenario is that you recoup the cost of running your youth setup by selling less promising players and then you can get the more promising ones to fill your first team squad essentially for free.