Making white chocolate is far easier than you might think. In fact, it only takes four ingredients. Here's what you'll need:
- 2 ounces food-grade cocoa butter
- 1/3 cup powdered sugar
- 1/2 teaspoon powdered milk
- 1 teaspoon vanilla extract
Cocoa butter is a type of fat that is extracted from the cocoa bean.  It is often sold for use in cosmetics since it makes an excellent moisturizer. Because of that, you need to make sure that the cocoa butter you purchase is food grade. Typically, you will have the best luck ordering it online. If you want to shop locally, you will most likely need to hit up a local baking store or health food store.
In addition to the above ingredients, you may also want to have a mold on hand to pour the melted white chocolate into. If not, you can always drop it onto wax paper as well. You can even get fancy and pipe the white chocolate onto the paper in various shapes such as stars or snowflakes. 
Once you have everything gathered together, start by melting the cocoa butter in a double boiler. If you don't have a double boiler available, you can create your own by boiling water in a large saucepan with a smaller saucepan resting inside. Once the cocoa butter has melted, sift in the powdered sugar, mixing it thoroughly. Next, add the powdered milk and vanilla extract.
Finally, finish by pouring the mixture into a mold. Alternatively, you can drop it by the spoonful onto wax paper. Allow it to cool and it is ready to eat.
Here's a great video that shows the entire process: