don't want her to waste her money
Unimportant. The most unimportant thing you wrote. Look, on some level she knows it wasn't an appropriate gift, she know this - but she couldn't help herself. She's living vicariously. It brought her joy. The best you can do is not emphasize her short-comings - it is a short coming - trying to decorate your house. Don't overthink it. Put it away. Display occasionally when she visits if that doesn't get under your skin. Or donate it. But also don't be so stubborn that you don't consider that in the future your kid may really like it. You have all the power here.