Which is correct: "on two weeks" or "in two weeks"?

Which is correct depends on what is meant.

"They'll quite happily squander a whole year's savings on two weeks in the sun" means they will squander the year's savings by spending it on a holiday; a package deal, perhaps, or an expensive hotel.

"They'll quite happily squander a whole year's savings in two weeks in the sun" means that they will squander the year's savings during the two-week period; on gambling, perhaps, or some other pleasure, and for some reason the sunniness is relevant (heat affecting the brain, perhaps?).

In this case, "on" is correct. You can squander something of value. And you can squander something of value on something of lesser value.

All of these are correct:

I'll spend $10 on a car.
I'll squander $1,000 on a broken down car.
I'll squander $10 on two weeks in the sun.
I'll happily squander a whole year's savings on two weeks in the sun.