How do I update my 2020 MacBook Air running macOS Catalina 10.15.7?

You should be able to update an Intel-based MacBook Air (Retina, 13-inch, 2020) to the current version of macOS, Sequoia. Vendors like Microsoft and Adobe tend to support only the "most recent three" – so you probably want to install at least Ventura.

See: How to download and install macOS - Apple Support

And: If an error occurred while updating or installing macOS - Apple Support (to which the first article links)

If you install Sequoia, you might want to go to Settings > Desktop & Dock, and find and turn off the switch "Drag windows to menu bar to fill screen."

I upgraded from Ventura to Sequoia and things went pretty smoothly, except that Sequoia turned on this "feature" by default, resulting in extremely annoying and unwanted behavior.