Demi, 19, has openly battled and overcome depression, drug-use and bulimia and experts believe she "could potentially" be a positive influence on the young contestants.
Clinical psychologist Vivian Diller, Ph.D., told Celebuzz: "Demi has been outspoken and inspiring to others about how you pick yourself up after you've been down.
"She may be very good, because she cares a lot. Let's hope that she uses that to be a fair and empathic judge. She could potentially be a good role model for others."
The 'Camp Rock' actress filmed an MTV confessional in 2012, entitled 'Stay Strong', which showcased her difficult path to recovery.
Demi - who was admitted to rehab in November 2010 after her parents staged an intervention - admitted to having suicidal thoughts in the documentary, saying: "There's days where you're going to struggle I cannot tell you that I have not thrown up since treatment. I cannot tell you I've not cut myself since treatment. I'm not perfect. This is a daily battle that I will face for the rest of my life."
Demi has the full support from Simon in her new role and he chose her for the position because he believes younger viewers will be able to relate to her.
The music mogul said: "Demi's had an amazing career in music, TV and film for someone her age. She's young, confident, and enthusiastic. I think it's really important that she speaks to our younger audience. The new panel will be dynamic and will work really well with the changes we are making to the show."