He didn't create demons. They chose to follow Lucifer in his rebellion against God and were cast out of heaven. They are actually fallen angels.
God allows everything for His purposes. His ways are far above ours and we cannot always imagine why God does what He does. From here our perspective is limited, but from above it all fits together.
God has given us free will. He does not force His will on us, but rather allows us to choose.
It is very limited human reasoning to expect an all-powerful, all-knowing God to intervene to make everything right right now, but that would not accomplish His purposes, and unless one reads and studies the Bible, it is totally not understandable to the human mind.