If you want to keep your starter in your party, Charmander. Otherwise, Squirtle.
There aren't a lot of fire types in Gen 1. By putting charmander in your party, you're sacrificing Ninetails, Arcanine, Rapidash, Magmar, Moltres, or Flareon. Flareon sucks, Rapidash looks like shit, Magmar is pretty bad, although you might want him for fun, and you don't use Moltres because it's a legendary and a shitty one at that.
This pretty much leaves Ninetails and Arcanine. They come to you early enough in the game that you can travel with them and they're actually kickass.
I can't list all the water types you can choose from because there are 32 in Gen one. There are a ton of cool water types you've never had on a team, and unless you're going to double up on water, if you want a balanced team, you're wasting novelty by choosing squirtle.
That said, anyone who doesn't deposit their starter is still playing like a 5 year old. I deposit all my Pokemon after I beat a gym and get new ones.
