How do you upgrade your tools in animal crossing

Well.... You don't really upgeade them BUT you can make them golden like Golden Tools Golden Fishing Rod - Catch every type of fish one time.
Golden Bug Net - Catch every type of bug one time.
Golden Slingshot - Shoot 15 items out of the sky, then you get it if you shoot it down.
Golden Shovel - Bury a regular shovel in the ground. Dig it up one full day later. It will be golden.
Golden Watering Can - Keep the environment perfect for 16 days in a row. Pelly or Phyllis will then give you the golden can.
Golden Axe - Trade a scallop seashell to Pascal for the golden axe.