Being honest with the family is best. Tell them you need to take a child that is not with the agency because the pay is higher which will allow you to meet your family financial obligations but because of the age of the new child it would be in violation of the age restrictions. You are sorry but you have notified the agency about the situation but wanted to speak with the family personally so that they know it is nothing about them. I would keep all complaints to yourself and let them leave on positive terms. Tell the family in the morning at drop off and then call the agency right after to tell them the effective date. Do not be surprised if they pull the rest of the agency children too and give them to other caregivers in the agency so be prepared for that.