You can set up an account and her mother does not need to know anything about it. in fact you should not put the step daughter name on the account either. Just ear mark this money for her education. You could put the money in a CD. There is CD's that you can keep adding to. You could buy bonds. I believe EE bonds are tax free at maturity when use for education. Put them in your name as well as hers not just in her name. Savings accounts are a bad idea because they draw such little interest.
There is also an education program her in Illinois. I think it is called jump start. All the money is tax deductible when used for education.
I just would not tell your step-daughters mother about the money or the daughter. Just leave it between you husband and you. It is your money after all not his ex-wifes.