Ward vs Hostage
There is a subtle difference between a Ward and a Hostage.
Technically, Theon was a Hostage, kept to ensure his Father's best behavior. But officially he was taken as a Ward, not a hostage.
The two can however amusingly be the same. Theon himself noted it.
Bran did not understand [Occupation of Winterfell]. "But you're
Father's ward."
"And now you and your brother are my wards. As soon as the
fighting's done, my men will be bringing the rest of your people
together in the Great Hall. You and I are going to speak to them.
You'll tell them how you've yielded Winterfell to me, and command them
to serve and obey their new lord as they did the old."
ACOK
- Theon VI
Or as Catelyn said:
"He has," Edmure said stubbornly. "The Freys fought bravely in the
Whispering Wood, and old Ser Stevron died at Oxcross, we hear. Ser
Ryman and Black Walder and the rest are with Robb in the west, Martyn
has been of great service scouting, and Ser Perwyn helped see you safe
to Renly. Gods be good, how much more can we ask of them? Robb's
betrothed to one of Lord Walder's daughters, and Roose Bolton wed
another, I hear. And haven't you taken two of his grandsons to be
fostered at Winterfell?"
"A ward can easily become a hostage, if need be." She had not
known that Ser Stevron was dead, nor of Bolton's
marriage.
ACOK - Catelyn V
In any case, Theon was a Ward. He was raised the same as Eddard's sons, given the same martial training and education as his sons, entrusted to Ser Rodrik Cassel and Maester Luwin. The only difference was, Stark knew he may have to kill Theon someday so he never warmed up to him but by Theon's own testimony, he some times tried to play the part of second father-figure.
Theon held his tongue, though not without struggle. So that is the way
of it, he thought. As if ten years in Winterfell could make a Stark.
Lord Eddard had raised him among his own children, but Theon had never been one of them. The whole castle, from Lady Stark to the
lowliest kitchen scullion, knew he was hostage to his father's good
behavior, and treated him accordingly. Even the bastard Jon Snow had
been accorded more honor than he had.
Lord Eddard had tried to play the father from time to time, but to Theon he had always remained the man who'd brought blood and fire to
Pyke and taken him from his home.
ACOK- Theon I
and also:
He had thought that men would sing of him for a hundred years and
tell tales of his daring. But if anyone spoke of him now, it was as
Theon Turncloak, and the tales they told were of his treachery. This
was never my home. I was a hostage here. Lord Stark had not treated
him cruelly, but the long steel shadow of his greatsword had always
been between them. He was kind to me, but never warm. He knew that
one day he might need to put me to death.
ADWD- Prince of
Winterfell
Tradition of Fostering
It is a very common part of Westerosi culture that children (Mostly male heirs or second in lines) of one House are raised by some other Lord as wards, in order to deepen the ties between the two families as the Children of two houses then develop fraternal feelings for each other and in many cases, long lasting friendships. Alliances are very important in the aristocratic world.
For example, if we see at some of the main names, we will note that most of them have been fostered elsewhere:
- Robert Baratheon - Fostered by Lord Arryn
- Eddard Stark - Fostered by Lord Arryn
- Jaime Lannister - Fostered by Lord Crakehall
- Prince Doran Martell - Fostered by Lord Gargalen
and the list goes on.
Even Cersei realized the importance of this tradition.
The litter began to slow, which could only mean that they were near
the top of the hill. "You should bring this son of yours to
court," Cersei told Lady Merryweather. "Six is not too young. Tommen
needs other boys about him. Why not your son?" Joffrey had never had a
close friend of his own age, that she recalled. The poor boy was
always alone. I had Jaime when I was a child . . . and Melara, until
she fell into the well. Joff had been fond of the Hound, to be sure,
but that was not friendship. He was looking for the father he never
found in Robert. A little foster brother might be just what Tommen
needs to wean him away from Margaery and her hens. In time they
might grow as close as Robert and his boyhood friend Ned Stark. A
fool, but a loyal fool. Tommen will have need of loyal friends to
watch his back.
AFFC - Cersei VI
Okay Whatever, but where does Theon get his money?
Sadly, there is no mention of it in the books or the show.
If we take a look at a system of Wardship in Medieval Europe, which is basis of ASOIAF, we can make some speculations.
In most of Europe, in case of a minor orphan heir of some landed noble, closest relatives would act as Foster-Parent/Guardians to that heir. But in Normandy and England, a different system was used. It was the liege lord of that minor noble would act as Guardian. The Lord used to get revenue from that minor's estates on the basis that since the Child cannot perform military service he's supposed to, the Lord has a right to take the money from him to pay for replacements, as long as the Lord provided money for raising the Child (which was also provided by the Child's own holdings anyways). So one could say that the Ward paid his own way. And if that is the case, We can assume that Theon Greyjoy's expenses were paid by his father to Starks. Another interesting thing to note is, Wardship of Lands and Wardship of body were different in Medieval England. A minor Lord might have many Guardians of his Lands but only one of them could be Guardian of his body.
GRRM's core inspirations come from French (Normandy was and is a Part of France) and English history. Quoting him:
Most of my borrowings, however, come from English and French medieval
history, simply because I am more familiar with those than with the
heroes, legends, and traditions of other countries.
But then again, the Westerosi system is quite different. Wardship occurs regardless to the noble being orphan. It is done mostly out of Goodwill and to build alliances or to end feuds. The norms are different as well. For example, the Ward and Children of his Foster-Parents are considered siblings of sorts, Foster-Brothers and Sisters.
GRRM himself says he takes inspiration from real stuff but doesn't simply translate history into fiction. He modifies things along the way. Quoting GRRM:
The Wars of the Roses have always fascinated me, and certainly did
influence A SONG OF ICE AND FIRE, but there's really no one-for-one
character-for-character correspondence. I like to use history to
flavor my fantasy, to add texture and versimillitude, but simply
rewriting history with the names changed has no appeal for me. I
prefer to reimagine it all, and take it in new and unexpected
directions.
He also said:
I have drawn on a great many influences for these books. I do use
incidents from history, yes, although I try not to do a straight
one-for-one transposition of fact into fiction. I prefer to mix and
match, and to add in some imaginative elements as well.
When everything is different and GRRM himself makes changes to his real historical influences, we can assume that the Guardian Lord is responsible for the sustenance of the Ward. So that would mean Theon received an allowance from Eddard Stark, just like Robb or Jon would have received.
As for the specific, uh activity, it is possible that the courtesans didn't charge him any money. He was ward of the Lord of Winterfell after all. But then again, if Others Lords pay their way, why should it be different for Theon? But you know, just putting it out there. A possibility, however unlikely.