In a medium saucepan, heat milk, caramels and butter together over medium heat. Stir occasionally and remove from heat when smooth. Cool for at least 10 minutes.
Line a baking sheet with waxed paper. Pour some of the cereal on another baking sheet or in a shallow dish.
One at a time, dip marshmallows into caramel mixture. Immediately roll in cereal until completely covered. Place on waxed paper lined baking sheet until completely cool.
Store in an air tight container.
Recipe by Crumbs and Chaos at http://www.crumbsandchaos.dreamhosters.com/2015/12/krispie-caramallows/