Preheat the oven to 170 C and grease an 8 x 8 baking pan with butter. Set aside, while you prepare the cake batter.
In a bowl, whisk together the flour and baking powder. Set aside.
Add the saffron threads to one tablespoon of hot water, and set aside while it blooms and releases its aroma.
In the standing of a mixer (you can also use a handheld mixer) add the butter and sugar. Beat on medium high speed for about 5-7 minutes until the butter and sugar are well incorporated. The batter at this point will look fluffy and pale in color.
Add the eggs one by one, and mix on medium speed until well incorporated.
Now add the saffron water and the vanilla. Mix until just combine. Do not overmix.
Transfer the batter to the prepared baking pan, and bake for about 25 minutes or until a toothpick inserted into the cake comes out clean.
Remove from oven, and set aside to cool while you prepare the sweetened milk.