I agree 100% with Kidlove. I know that you need the income from this child, but if your other daycare families heard about this I'd be afraid that they'd jump ship - and then you're out however many incomes (and they're the good families)If it were me, I'd give them their notice. Keep it polite and professional - maybe use a neutral reason for why you're letting their little guy go, something like you're looking to reduce the number of children you care for - and take a leaf from the Queen: "Never debate your decision, Never explain - just politely inform people. "
Good luck !