I would be honest. Your comment about 3 kids under three is a reasonable talking point in my opinion - explain that your son is a handful for you as it is, and you're concerned about your ability to properly care for all 3 in one go. If you feel it may be an option in the future you could say that you may feel more comfortable when the children are older or if there's some emergency situation - possibly in which you are not the only adult present (if your husband is there, for example). If you aren't willing to entertain that, simply leave it at the above. "Oh, Friend, I sympathize with your situation, but I just don't feel able to babysit your children." Later, if your opinion changes on this point, you could begin offering play dates, maybe sleepovers, or even go straight out and say "It'll be easier now for me to babysit so if you need me, ask me and I'll try to help out!"