Wouldn't that eat up all your money?
End of quote
No, not in GC1 as long your colonies have a PQ >= 15.
It helps a lot with research but slows down building of wonders and trade goods.
To neutralize this problem a bit I build manufacturing improvements like Fusion Power Plant etc. exclusively on Earth and one or two other high PQ planets.
Another disadvantage of a high number of colonies is your vulnerability in case of war until you get a decent military power. I try to stay out of war to keep my empire growing. This can be hard sometimes since you have to give a decent amount of gifts, but it pays off in the long term. Good research and diplomacy it key for this strategy.