The demand for smart solutions to support people with dementia (PwD) is increasing. These solutions are expected to assist PwD with their emotional, physical, and social well-being. At the moment, state-of-the-art works allow for the monitoring of physical well-being; however, not much attention is delineated for monitoring the emotional and social well-being of PwD. Research on emotion monitoring can be combined with research on the effects of music on PwD given its promising effects. More specifically, knowledge of the emotional state allows for music intervention to alleviate negative emotions by eliciting positive emotions in PwD. In this direction, the paper conducts a state-of-the-art review on two aspects: (i) the effect of music on PwD and (ii) both wearable and non-wearable sensing systems for emotional state monitoring. After outlining the application of musical interventions for PwD, including emotion monitoring sensors and algorithms, multiple challenges are identified. The main findings include a need for rigorous research approaches for the development of adaptable solutions that can tackle dynamic changes caused by the diminishing cognitive abilities of PwD with a focus on privacy and adoption aspects. By addressing these requirements, advancements can be made in harnessing music and emotion monitoring for PwD, thereby facilitating the creation of more resilient and scalable solutions to aid caregivers and PwD.